Estimating the economic value of agricultural water using the virtual water concept

Gyumin Lee1 Yoon Hyung Kim2,*

World Institute of Kimchi1Department of Agricultural Economics, Chonnam National University2

2017.12. 636:641

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Water is an essential resource for human survival. According to the OECD Environmental Outlook to 2050, rapid industrialization and a global population increase by approximately two billion will likely increase global water use by 55% in 2050. However, water depletion has been getting worse than before and has been happening more quickly, as Earth’s water resources are limited. The present study proposes water management measures by using the virtual water theory which enables water consumption measurement and the confirmation and recognition of water scarcity problems, and will support the development of countermeasures. As a method for estimating the value of agricultural water, virtual water theory was used to calculate the amount of agricultural water input for domestic rice and to apply prices of agricultural water in the United States and China to Korean water prices. When the Chinese price was applied to Korean water prices, the value of agricultural water represented 0.3% of the Korean rice producer’s price. When the US price was applied to Korean water prices, the value of agricultural water represented 1.6% of the domestic rice producer’s price. The study exposes the percentage of the value of agricultural water in agricultural product prices, as well as how this scare resource may affect future prices. In the future, if there are water charges to effectively manage agricultural water, this study, which uses the virtual water theory, can be used as a preliminary research.